1217 EUCLID STREET AFFORDABLE RENTAL HOUSING
Topic/Item Disposition and Development Agreement (DDA) Deal Points Parties Lessor: City of Santa Monica (“City”);
Lessee: Hollywood Community Housing Corporation, (“Developer”) or a limited partnership controlled by the Developer;
Collectively: (“Parties”);
Disposition and Development Agreement (“DDA”) and Ground Lease Agreement (“Agreement”) Development Site The development site is comprised of approximately 15,000 square feet, between Arizona Avenue and Wilshire Boulevard, located at 1217 Euclid Street in Santa Monica, CA 90404.
The proposed development is 48 units total, with 47 affordable rental apartments with 5 apartments reserved for 30% AMI households, 17 apartments reserved for 40% AMI households, 25 apartments reserved for 60% households, and 1 three-bedroom manager apartment without income restrictions. Government funding regulations and requirements may change, thus necessitating adjustments to the unit mix and AMI levels to maintain competitiveness for said funding. City staff shall reasonably approve changes to the unit mix and/or AMI levels to ensure competitiveness for government funding sources. All units except the manager’s unit shall be reserved for households with an average household income of 60% AMI or less.
The current proposed unit mix shall be as follows: 21 one-bedrooms, 14 two-bedrooms, and 13 three-bedrooms.
The building will have the following amenities: Community room with kitchenette; bike storage room; community laundry; playground; planted roof terrace; large package room; and on-site offices for management staff. Utilization of the bike storage facility will be provided at no additional cost to the residents.
There will be some parking at grade and one floor of underground parking for a total of 40 vehicle spaces reserved for residents and on-site staff. The number of parking spaces could change due to design and building code requirements. City Manager is authorized to approve up to 10% change in the amount of parking spaces due to site constraints. Parking will be provided at no additional cost to residents.
The development includes approximately 1,725 square feet of ground floor space for ancillary use for property management, resident services and resident common areas. The affordable housing, together with the ground floor uses and one level of underground parking, are herein referred to as the “Development”.
Good Faith Negotiation In case of any dispute arising from this Agreement, including any question regarding its interpretation, validity, or termination, Parties will use best efforts to resolve the dispute by good faith negotiation.
Local Entitlements The Parties understand and agree that the Developer is eligible to apply for a local streamlined ministerial approval process and is exempt from California Environmental Quality Act (“CEQA”). The residential and ancillary uses are permitted by right.
Ground Lease Term The City will provide a ground lease term of 55 years plus two options of 22 years each, the options may be elected by the Developer and City after mutual agreement subject to tax credit financing requirements, provided that Developer is not in default under the terms of the ground lease. The term of the ground lease will commence upon concurrent closing of escrow for financing the development, as more fully specified in the DDA. The Ground Lease Agreement and Regulatory Agreement shall include cross-default provisions.
Ground Lease
Rent
Annual rent for 55 years is $1 plus City’s pro rata share of residual receipts based on the amount of public funding provided by each public lender with the City’s contribution being calculated based on the fair market value of the development site at construction loan closing (“FMV”), which shall be determined by an appraisal mutually agreed upon by the City and Developer in accordance with TCAC requirements. At Year 56, assuming extension of the lease is exercised, rent will be equivalent to City’s share of residual receipts. Notwithstanding anything to the contrary contained herein, the aggregate rent actually paid to the City during the term of the ground lease shall not exceed the FMV.
City Housing Trust Funds
Loan
If a funding gap should occur, City staff may approve HTF loans that comply with the underwriting criteria and loan limits within the City’s HTF Guidelines. Any request outside of these limits will be brought before City Council for approval. Developer/City to execute Housing Trust Funds Loan in the approximate amount of $11,000,000, which shall be secured by a deed of trust in favor of the City. Repayment of the loan shall be paid after payment in full of the Developer Fee, assuming both Parties agree to the Developer Fee. Repayment of the loan shall be paid from the City’s share of residual receipts after payment of the Ground Lease Rent. The loan term shall be 57 years from construction closing unless there is an early termination without construction closing.
City Regulatory Agreement The initial term of the City Regulatory Agreement will be 55 years from the date of the Certificate of Occupancy, be extended concurrently with each option to extend the Ground Lease Term. There shall be no subordination of City
Regulatory Agreement to other financing sources during the lease period and any extension thereto. The Regulatory Agreement shall reference the following:
1. Form of Tenant Lease
2. House Rules
3. Services Plan
4. Security Plan
5. List of Amenities
6. Tenant Selection Plan
7. Property Management Plan
Predevelopment Expenses All predevelopment expenses will be paid by Developer.
Non-City Development
Funding
Developer is required to obtain outside financing necessary to fully fund the Development, which includes a permanent bank loan, a construction loan, State and/or Federal tax credit equity, and any other funding the Developer deems necessary to achieve project feasibility.
The City will have approval rights to any loan documents or grant agreements with non-City development funders.
Developer Fee Developer to receive a maximum developer fee for the Development. The fee, including any deferred developer fee, will be subject to either the fee limit in the Santa Monica Housing Trust Fund Guidelines at the time of closing or a negotiated fee based on third-party review, up to the maximum allowable developer fee per CA LIHTC regulations at time of closing.
General Partner Asset
Management Fee
Developer’s maximum yearly general partner asset management fee will be capped as follows: $25,000, inflated annually at 3.5%.
Limited Partner Asset
Management Fee
Developer’s maximum yearly investor asset management fee will be capped as follows: $10,000, inflated annually at
3.5%.
Construction Bids The Developer will comply with City requirements regarding prevailing wage. Developer will provide the City with a list of subcontractors and conduct prevailing wage compliance review. Developer agrees to require a General Contractor to obtain most competitive pricing, terms and conditions, consisting of at least three subcontractor bids from the major trades.
Permanent Debt and Tax
Credit Equity
Developer agrees to hold a solicitation process for lenders and investors to obtain most competitive pricing, terms and conditions.
Financing Plan
Modifications
As changes are made during the predevelopment phase and prior to Development Closing, Developer shall submit to City for review updated versions of the Financing Plan reflecting any and all changes from prior versions submitted to the City. City and Developer shall jointly approve changes to the Financing Plan through construction loan closing.
Developer and City will meet and confer if costs increase to create a funding gap. If the funding gap cannot be closed within 24 months from execution of the DDA, the City will have the right to terminate the Agreement or provide an extension to be negotiated. City can terminate the Agreement for cause if Developer is in default of the DDA (subject to all applicable notice and cure provisions of the DDA).
Assignment of Contracts
and Plans
The City shall require the Developer to assign land use entitlements, plans, and contracts. This assignment shall survive termination of the DDA; provided however, in the event the City elects to terminate the DDA as a result of a funding gap and Developer is not otherwise in default or owe the City any Housing Trust Fund loan, at the City’s request, the Developer shall assign, on an as is basis without any representation or warranty, all of its right, title and interest in any land use entitlements, plans, and contracts developed in connection with the Project (the “Work Product”) upon the City’s agreement to reimburse the Developer for the demonstrated third party out of pocket expenses incurred by Developer and its affiliates in connection with the Work Product.
City Approval Rights City shall have approval rights, which shall not be unreasonably withheld or delayed, over the following:
a. Key members of the development team, including the General Contractor b. Property Management team, Property Management Plan, Lease, Tenant Selection Plan, House Rules, Housing Retention Process, Security Plan
c. Service Provider Team and Services Plan
d. Key documents, including but not limited to the Limited Partnership Agreement and Construction Contract e. The Development’s development budget and annual operating budget f. Withdrawals from the operating and replacement reserves, consistent with the requirements of the lender/investor. g. Transfer or sale of leasehold interest, and refinancing, consistent with the requirements of the lender/investor h. Transfer of general partner, or managing general partner interest and all associated transfer documents i. Partnership and financing documents
Transfer or Assignment Developer agrees to City approval rights over General Partner transfer or assignment that are industry standard for tax credit financed developments.
Tenant Selection Subject to federal and state fair housing laws, the Development must utilize the City’s Below Market Housing waitlist to fill affordable apartments.
Security The City shall approve the Security Plan as part of the Regulatory Agreement. Developer is required to provide security in accordance with the Security Plan. If the City believes that the Security Plan is insufficient, the City can request a meet and confer with the Developer to reassess the Security Plan. The Security Plan shall include at a minimum:
• Security staff during construction
• Controlled access points
• Perimeter security fencing
• Key fob access and automatic locking
• Alarm system
• Security cameras with an on-site monitoring system at the property management office Building sustainability • Developments will meet Santa Monica Energy Performance Requirements as defined by the Energy Performance Approach Reach Code.
• Developments will meet Santa Monica's Electric Vehicle Charger Reach Code and provide secure bicycle parking on-site to encourage alternate mobility options
• Developments will be solar-ready, with infrastructure in place to serve photovoltaic arrays when funding is available.
• Developments will utilize drought-tolerant planting.
• Natural ventilation - while each unit will be equipped with air conditioning, units are planned with operable windows to maximize natural ventilation and reduce A/C demand • Site orientation and self-shading - windows are placed to maximize natural daylight within units and windows facing south and west are self-shaded with architectural elements to reduce heat gain • Planted roof areas and podiums to mitigate urban heat island effect • Shaded, open-air common areas
DDA Upon approval of the Term Sheet by the City Council, Developer and City staff will negotiate a DDA\containing all terms and conditions of the transaction for approval by the City Council. The City Council reserves the right to reject the recommended DDA.
The DDA will include, at a minimum:
1. Legal Description
2. Site Map
3. Scope of Development
4. Schedule of Development
5. Development Budget
6. Pro Forma Sources and Uses (Financing Plan)
7. Form of Regulatory Agreement
8. Form of Ground Lease
9. Memo of Ground Lease
10. Form of Assignment of Contracts and Plans
11. Assignment of Agreements